Banks Prepare for Greek Default

Bankers are bracing for a Greek default, and their best hope is that Europe can erect firewalls around the banking system strong enough and soon enough to prevent it from spreading to other euro-zone countries.

via cnbc

G 20 Pledges to keep markets Stable

Financial ministers and central bankers from the Group of 20 major economies said in a statement late Thursday that the bloc would conduct a "strong and coordinated international response to address the renewed challenges facing the global economy." The comminque added that the G-20 would take all necessary actions to preserve the stability of banking systems and financial markets as required."

EU officials expect Greece to default

There is a growing consensus among EU diplomats and officials that Greece will default while remaining inside the eurozone. 

Intense talks are taking place in Berlin, Paris, Frankfurt and Brussels about how to manage a Greek default in the short to medium term.

“It is not now but a question of when and how, not if,” said a source.

via telegraph

IMF : Weak and Bumpy Global Recovery Ahead

The global economic recovery is slowing, with world growth projected at 4 percent in both 2011 and 2012, down from over 5 percent in 2010, the IMF said in its latest forecast.

IMF Notes 

• Global growth forecast to moderate to 4 percent in 2011 and 2012
• Advanced economies facing anemic growth of only 1.6 percent in 2011
• Multiple shocks combined with insufficient rebalancing stalling recovery

read full report here

George Soros : The Double Dip is Already Here

FOMC Statement

The following is the text of the Federal Reserve’s decision Wednesday to swap $400 billion of holdings into longer-term debt: 

“Information received since the Federal Open Market Committee met in August indicates that economic growth remains slow. Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has been increasing at only a modest pace in recent months despite some recovery in sales of motor vehicles as supply-chain disruptions eased. Investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable. 

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee’s dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to extend the average maturity of its holdings of securities. The Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less. This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate. 

To help support conditions in mortgage markets, the Committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. In addition, the Committee will maintain its existing policy of rolling over maturing Treasury securities at auction.

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate.

ECRI : Risk of a Double Dip for US quite high

Achuthan, co-founder and chief operations officer of the Economic Cycle Research Institute, says all of his economic indicators point to more sputtering ahead.

"The risk of a new recession is quite high," he says.

If we do have a double-dip recession, Achuthan says, the people who are already having trouble finding work and paying bills are already in a depression and that they "are going to suffer more."

Check Achuthan and the ECRI’s impressive recession calls in recent years here

US fund withdrawals top $75 bn, Highest since lehman collapse

Investors have pulled more money from US equity funds since the end of April than in the five months after the collapse of Lehman Brothers Holdings, adding to the $2.1-trillion rout in American stocks.

About $75 billion was withdrawn from funds that focus on shares during the past four months, according to data compiled by Bloomberg from the Investment Company Institute, a Washington-based trade group, and EPFR Global, a research firm. Outflows totaled $72.8 billion from October 2008 through February 2009, following Lehman's bankruptcy, the data show

via ET

Italy suffers downgrade

S&P cuts Italy's sovereign credit ratings by one notch to A/A-1, with a negative outlook., citing "weakening economic growth prospects" for the nation, and political gridlock in Rome.

Obama Unveils Deficit Plan

President Barack Obama called for $1.5 trillion in tax increases over the next decade, largely targeting the wealthy, to help trim the deficit, saying U.S. prosperity depends on paying down the federal debt.

 

In combination with cuts in spending, Obama said, his plan would reduce the long-term deficit by $3 trillion beyond the $1 trillion that was agreed to as part of a deal to raise the U.S. debt ceiling.

Via Bloomberg

Dollar Libor rate Climbs to highest in a year

The cost to borrow money in dollars remained at the highest level in more than a year on Monday while the rate to borrow euros was little changed. The London interbank offered rate, or Libor, for three-month dollar loans traded at 0.35133%, little changed from Friday and up from 0.34289% a week ago. The three-month Libor rate for euros was little changed at 1.48375%, near the highest since early 2009.